10 reasons why men need Sheconomics

Don't let our pinkness put you off - we have lots of bloke-friendly stuff going on. Here's why we think men need Sheconomics too:

·      1. Because research shows your investments would surge if you used your feminine side a tad more. No need to greet your latest dividend with a tearful acceptance speech, it's just about not being over-cocky, a risk-taker or one of the boys. More diverse portfolios, caution and not over-reacting to a volatile market explain why female investors outperform men consistently.

·     2  Because you could learn how to dress for success. Drop that favourite well-worn brown suit off at Oxfam and let someone with a tape measure get intimate with your inside leg. Seriously, people do judge you by what you wear. A lot. Men in bespoke suits are judged to be more successful, confident, trustworthy, flexible and higher earners than their off-the-peg counterparts.

·     3. Because you could suss out how to have cool, non-confrontational conversations about money. And you could have a better, happier home-life if you did so. There are tricks and strategies we can all learn that will make money-chat nicer. No issues. No arguments. Hugs optional.

·    4.  Because you could be a better Dad.  Without realising it parents play more roughly with boy babies than with girls. They let boys explore more than girls and use more emotion words with their daughters than with their sons. Swat up on the significant but subtle ways you can give your daughter the kind of start in life you are unconsciously giving your son. Get wind of some good Sheconomics strategies for raising kids.

·      5. Because you’ll do the right thing by her in the event of the unmentionable happening.

     When multi-million selling author Stieg Larsson died suddenly at 50 his estranged family, and not his life-long partner Eva, inherited his fortune. Eva's even having to fight a legal battle to stay in their apartment. No-one wants to think about death but not thinking of those you'll leave behind is dumb.

  

·     6. Because you overwork your logical left brain and neglect the poor old right. Ever thought about which side of your brain is managing your money? Intuition can be a useful tool, but seems to be the reverse of logic. The field of behavioural economics is obsessed by these concepts because humans are rarely rational decision-making machines. They fall victim to flawed logic, emotional reactions and cognitive biases.

·      7. Because you could realise some of the hidden forces behind financial success, and why it helps to be tall, left-handed and tidy. 

      Yes, we said tidy. No, we’re not nagging. It's just that taller people earn more than shorter people and left-handed people earn more than right-handed people. Things that are hard to change. But people with tidier homes do earn more than people with messy homes. Reason to not drop those socks on the floor?

·      8. Because if you’ve ever suffered death-by-dinner-party you’ll see how company boards make the same mistakes as very dull hosts. Mixing up the guests brings livelier conversations and new perspectives. About 10 years ago Norwegian boards were mostly made up of men with very similar views and backgrounds who went hunting and fishing together. This meant there was a huge risk of group-think in the boards’ decision-making processes, and a real lack of diverse perspectives.

     Adding just 3 women to boards has been shown to increase the company's bottom line by 40% and boost the country's economy.

·      9 . Because emotional intelligence is just as important as IQ. You’ve always known that IQ isn’t all it’s cracked up to be - there are better ways of selecting the right bunch of people to work with.

     Studies show the most effective groups listen to each other, share constructive criticism, have open minds, are not autocratic and use conversational turn-taking to good effect.

·      10. Because we can all learn something from the bagel man. You can tell how much people like their bosses and their work from how much dosh they drop in the honesty box. It could be a good metric for getting to know the health of your company and the happiness of your employees. Honest. 

 Final word from a lovely friend of Sheconomics, Alan Newman of the Finance IT Network:

• "There's probably some merit to the accusation that the financial services sector is 'male, pale and stale'. The insights from this book - co-authored by a Professor of Psychology and a Financial Coach (who left IFA boredom behind her) - should be compulsory reading for us blokes."                        

Hard Wired For Luxury

What does this new ‘age of austerity’ spell for luxury purchases like champagne?

Will people stop buying it and switch to a cheaper tipple? The government and economists would have us think so, but they’re forgetting one thing.

The human brain is hard-wired for luxury.

Yes, pleasure seeking is a key motivator when it comes to human behaviour. And hedonism doesn’t give a toss about the state of the economy.

This was the topic of a talk I gave today at a wonderful Champagne Assembly organised by G.H. Mumm and Perrier Jouet. The reason we’ll always love a bit of luxury lies deep in the emotional part of our brain. Neuoscience has revealed the subconscious roots of consumer behaviour. It shows us that luxury brands excite the emotional, feeling part of the brain that ordinary brands simply leave cold.

Recently in Germany a couple of neuroscientists (Schaefer & Rotte, 2007) scanned people’s brains as they studied logos of brands of cars. When looking at everyday brands, there was activity in the thinking part of the brain – (the dorsolateral pre-frontal cortex) – but when they saw luxury brands there was frantic activity in the feeling part of the brain (the ventral striatum).

The researchers say this brain area is where our ‘hot buttons’ are located. It’s where we feel pleasure, desire, passion and happiness. There may be an evoluntionary imperative for this, since people who feel happy are more likely to find a mate. And happier people even live longer, according to Dutch psychologist Veenhoven.

So our thinking brain may be telling us to cut back. But, because we’re hard wired for luxury, those top brands will continue to press our hot buttons every time.

Does it matter which hand you pay with?

Last week Simonne and I were fortunate enough to hear Paul Lewis of Radio 4’s Moneybox Live speak at the Financial Services Research Forum. As well as being well-informed and an engaging spekaer as you’d expect, he also had this good tip on debt.

It was that the debt shouldn’t last longer than what you’re buying.

So if you go into debt to cover Christmas, it should be paid off within 12 months. Borrow for a holiday and make sure you’ve cleared the debt before the next trip away. Go into debt for a pair of shoes but only for as long as they’re in fashion. This would be, he joked, about two weeks. We have to take issue with him there!

My own talk to the forum was about left and right brain processes. Afterwards Paul passed on to me a delightful little Do Something Different tip that he said he came up with years ago. It’s this.

Pay with the opposite hand.

Not only will this feel different, it might affect your conscious experience in another way. The right hand connects to the left brain hemisphere and the left hand to the right. Since the left is more logical/thinking and the right more intuitive/feeling, will this make a difference? Who knows, but it’s worth a try. 

Also scientists have shown that generally people associate the right side with positive concepts, life and all things good and the left with negativity and death. But in left-handers it's the opposite, which suggests it's not a cultural norm but a personal one. 


So left-handers are an interesting example of conceptual associations resulting from sensory-motor experience. According to this theory, left and right handers should feel less positive when paying with the opposite hand.

If you try it, let us know how it felt. Just don’t drop those sale shoes while trying to get out your credit card with the wrong hand. Some quick right hander could have them away before you can say 'short fashion fix'!

WHICH SIDE OF YOUR BRAIN IS MANAGING YOUR MONEY?

 Here’s a quick question for you:
A notepad and pen together cost £1.10.
The notepad costs £1.00 more than the pen.

How much does the pen cost?

Sixty-four percent of people say 10p. That’s the wrong answer.

The right answer is 5p. The notepad costs £1.00 more than the pen. So the notepad costs £1.05 and the pen 5p, together they cost £1.10.

‘But I can do simple maths’, I hear you cry. Of course you can but sometimes we don’t bother to stop and work things out. And in the case of the notepad and pen question the brain thinks it can take a short-cut. After all, £1.10 and £1 carve up nicely into a difference of 10p, so that’s the answer we give.

The brain is a clever, complex piece of kit. But it also doesn’t like to do more work than necessary. So it automatises lots of its processing, and relegates all kinds of decisions to the unconscious, intuitive part of the mind. That’s good most of the time. If it didn’t you’d have to work out every morning whether your socks go on before or after your shoes and whether that arrangement of features on a human head represents your partner’s face! But automatising some things gets us into trouble.

Aside from being a quirky bit of fun to catch out your mates with, this question also reveals something deeper about people. It can also tell us how good they are with money.

In a recent study I did, in conjunction with first direct, almost two-thirds of the sample got the question wrong. Those people were also more lax with their money. They had more credit card debt and fewer savings.

This study is the first to show a link between a person’s style of thinking and their personal finances. The notepad and pen question is adapted from a test of Cognitive Reflection (Frederick, 2005, Journal of Economic Perspectives). I’ve called people who give the right answer  ‘reflectors’. They use careful, logical thinking; a style linked to left-brain processes.

Those who get it wrong are ‘intuitors’ and more right-brained. They are more impulsive and go along with their gut instinct, even though it’s wrong.

Someone who  is more left-brained and able to stop and reflect can also suppress the need for immediate reward (buy now, pay later with credit) and will give more consideration to the long-term (invest now, benefit later).

Intuitive people can’t suppress the first answer that springs to mind. They’re the kind of people who live for the moment and avoid putting effort into anything that doesn’t bring short-term gain. This was linked to poor money management, such as only making the minimum repayment on a credit card.

Economists have only just begun to analyse how a person’s cognitive skills relate to their financial decisions. Irrational financial decision-making is the subject of a fascinating field of study called behavioural economics. 

This examines why people often act against self-interest. Examples might include:

• -       having both money in savings and credit card debt (where saving get a paltry return and credit card interest rates are mammoth)
• -       Or the strange fact that people are willing to pay more for something when buying with credit card than they would pay if they had to hand over the cash.
• -       Or people who stay loyal to a bank yet moan about the service they receive

Right-brained people might feel dissatisfied with their bank but because they don’t stop and reflect and they’re not great at decisions involving effort, they don’t change it.

In the study 43% of intuitors had been with same bank since leaving school (for some this was thirty years or more)! This is irrational given how much choice there is now and the cash incentives for switching. For example, first direct gives a satisfaction guarantee. They’ll pay people to switch and if they’re not completely satisfied, they can leave the bank and receive a further £100 for their trouble. 
It seems a no-brainer to me.

Here are some other stats from the survey, carried out with over 500 participants:

• ·       66% of reflectors pay off their credit card in full every month (43% of intuitors do)
• ·       Twice as many intuitors than reflectors pay off only the minimum on their credit cards
• ·       Almost one in four reflectors have changed where they bank at least twice (43% of intuitors have never changed bank)
• ·       87% of reflectors have money in savings (70% of intuitors do)

When looking overall at people’s money behaviour the survey also revealed that:

• ·       1 in 3 people over the age of 55 have always been with the same bank.
• ·       Only 1 in 5 young people (18-25) pay off their credit card balance in full every month.
• ·       Men are more likely than women to pay off their credit card in full each month (63% vs 48%)
• ·       1 in 3 young people (18-25) have no savings (i.e. for non-retirement or emergency purposes)
• ·       1 in 4 people aged 25 to 55 have no savings
• ·       Most (92%) over 55s have savings

More info from first direct's newsroom